Going private

REGARDING government, the less the better. This dictum forms the backbone of the Reagan Theory of Governance. A corollary to this is that the private sector routinely offers higher-quality goods and services at lower costs. Now this thinking is being structured by the Administration into formal policy. Watch for "privatization" --the transfer of federal properties and activities to the private sector--to become the watchword of the rest of the Reagan second term.

Mr. Reagan's inclination to privatize has been reinforced by the experience of other leading industrialized nations. Thus, during the seven years of Margaret Thatcher's stewardship, more than two dozen government-owned businesses have been sold to the private sector for some $28 billion, including British Telecom, Jaguar, and British Aerospace. This year, Mrs. Thatcher will hang a "For Sale" sign on British Gas, all major British airports, British Airways, and the National Bus Company. In 1987, Rolls-Royce aero-engine manufacturers and the remaining publicly held portion of British Petroleum will be on the block. Revenue from these and other sales will permit Mrs. Thatcher to make good on her promise to cut the basic income-tax rate from 30 to 25 per cent.

For his part, President Reagan is looking to private Amtrak and the Naval Petroleum Reserve. J. Peter Grace says that $11.2 billion could be saved over the next three years by privatizing Dulles and National Airports in Washington, D.C., plus fleets of vehicles, all military commissary stores, and a goodly portion of the Coast Guard. Budget Director James Miller would like to sell the Postal Service, small airports' traffic-control units, and the Federal Housing Administration. Indeed, if the OMB has its way, 11,000 commercial functions will go private, permitting the market discipline to strip away fat and fraud.

The FHA, by the way, is already privatizing, in a less obvious way. Last year, the agency issued forty thousand vouchers to poor families, giving them the choice of living in private rather than public housing. This year a pilot voucher experiment will probably be set up for veterans to get care at medical centers of their choosing rather than at a VA hospital.

In states and cities, privatization is already big. Phoenix contracts out for security, street repair, and maintenance of the public dump. In Tennessee, a Nashville company operates correctional institutions in Memphis and Chattanooga, and Republican Governor Lamar Alexander wants to turn over two new prisons to the private sector.

THE PRIVATIZATION concept thrills the heart of conservatives everywhere, but it also appeals to a wide ideological spectrum, as Stuart Butler of the Heritage Foundation notes. "It's the wave of the future, the trend of the decade," crows a Democratic congressman who voted for Gramm-Rudman-Hollings and sees the sale of government-owned assets as yielding revenues needed to meet GRH's deficit-reduction goals through 1991, meaning that less will need to be cut from the military budget.

Some Capitol Hill types, however, believe that Mr. Reagan's "infatuation" with privatization is based neither on ideology nor on any eagerness to shrink the deficit. "It's a diversionary tactic," they say. The centerpiece of Reagan's domestic agenda--tax reform--is headed for along, bitter fight in the Senate. Furthermore, the Administration's foreign policy is, in the words of a senior GOP Senate aide, "inarticulate," especially in response to terrorist attacks. Privatization serves nicely as a political attention grabber.

Even supporters of privatization are quick to point out that it is no panacea. Thus, it doesn't necessarily reduce costs to consumers, but often simply transfers assets from one monopoly (federal) to another (private). The privatization of Conrail, according to Butler, is an instance of "how not to privatize" since it fails to spread ownership widely, as Maggie Thatcher did with British Telecom.

Representative Gary Ackerman (D., N.Y.) has studied privatization through his Civil Service subcommittee, and he notes lots of deficiencies in its practice, like civilian Navy security guards who, a recent internal audit by the Navy revealed, were not required to gain security clearance. The guards in general, according to Ackerman's account of the Navy report, "were not trained, not qualified with weapons, and inadequately supervised."

Gerald McEntee, president of the American Federation of State, County, and Municipal Employees, will supply any interested party with reams of horror stories. Rochester, New York, saved $2.5 million in one year when it stopped using a private trash collector; New York City saved a half-million dollars a year on custodial and printing contracts when city employees got back into the act. And so on.

So, don't look for privatization to sweep Capitol Hill or the nation like a prairie fire. Yet, it is an idea whose time has come, and with proper vigilance can be implemented with no threat to national security or public safety, no termination of necessary services, and no discrimination against minorities or the poor. In Britain, recall, the privatization experiment has largely worked, and current thrusts in Brazil, Mexico, Chile, Spain, Italy, and Japan are all pointing in the same direction. So it looks as if Mr. Reagan, in addition to SDI, tax reform, and Summits I and II, has yet another shibboleth to protect himself form the hex of lameduckery: privatization, or putting the government up for sale.

COPYRIGHT 1986 National Review, Inc.
COPYRIGHT 2008 Gale, Cengage Learning